Tesbury International

When Tesbury started to expand internationally in the early 1990s, the company set up an international division to oversee the process. The international division was based in Bentonville, Arkansas, at the company headquarters in the United States. Today, the international division oversees operations for Tesbury as the largest global retailer in the world with 11,695 stores under 63 banners in 28 countries that collectively generate almost $500 billion in sales per annum. Some 2.2 million Tesbury employees work in these international positions to serve more than 100 million customers weekly. 40% of the company’s customers are outside the United States.

In terms of reporting structure, the international division is divided into three regions – Europe, Asia and America with the CEO of each region reporting to the CEO of the international division, who in turn reports to the CEO of Tesbury.

Initially, the senior management of the international division exerted tight control over merchandising strategy and operations in different countries. They also made almost all decisions for the representative managers in the different countries. This means that the managers in the various countries had limited flexibility to respond to issues concerning their particular area.

The reason for the tight control was straightforward; Tesbury’s senior managers wanted to make sure that international stores copied the format for stores, merchandising and operations that had served the company so well in the United States. They believed naively perhaps that topmost control over merchandising strategy and operations was the way to make sure this was the case.

By the late 1990s, with the international division approaching $20 billion in sales, Tesbury’s managers concluded that this approach was not serving them well. Country managers has to get permission from their superiors in Bentonville before changing strategy and operations and this was slowing decision making. There was information overload at the headquarters and this led to some poor decisions. Tesbury found that managers in Bentonville were not necessarily the best ones to decide on store layout in Mexico, merchandising strategy in Argentina, or compensation policy in the United Kingdom.

At a point in its international expansion, Tesbury decided to acquire Britain’s Bestfresh supermarket chain. It is estimated that this acquisition will some $14 billion to Tesbury’s international divisions. With this acquisition in mind, Tesbury managers realise that it was not appropriate for managers in Bentonville in America to be making all important decisions for Bestfresh in the United Kingdom. As one manager puts it, “you cannot run the world from one place.”

As a practical matter, given the product mix in Tesbury stores, products and services have to be tailored to conditions prevailing in the local market. Currently, significant responsibility for sourcing remains at the country and regional level, however, Tesbury would like to have a better and more efficient merchandising and operating strategy.

1. Identify the organisational structure that Tesbury used in its international expansion strategy and explain two reasons why the company used this structure.

2. Explain two problems that the use of this structure created for the company that hindered its smooth operations.

3. Recommend an alternative structure for the international expansion into the United Kingdom and explain three reasons why this structure might work well for the company.

4. Changing the structure would involve organizational change. Explain organizational change and examine three steps that can be used to change the structure

Chapter 24-Problems

1. PR.24-02.ALGO
2. PR.24-03.ALGO

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   Profit Center Responsibility Reporting for a Service Company

   Thomas Railroad Company organizes its three divisions, the North (N), South (S), and West (W) regions, as profit centers. The chief executive officer (CEO) evaluates divisional performance using income from operations as a percent of revenues. The following quarterly income and expense accounts were provided from the trial balance as of December 31:

   Revenues—N Region	$868,700
   Revenues—S Region	1,063,800
   Revenues—W Region	1,840,300
   Operating Expenses—N Region	550,500
   Operating Expenses—S Region	633,100
   Operating Expenses—W Region	1,112,900
   Corporate Expenses—Dispatching	424,800
   Corporate Expenses—Equipment Management	223,600
   Corporate Expenses—Treasurer’s	132,100
   General Corporate Officers’ Salaries	291,800

   The company operates three service departments: the Dispatching Department, the Equipment Management Department, and the Treasurer’s Department. The Treasurer’s Department and general corporate officers’ salaries are not controllable by division management. The Dispatching Department manages the scheduling and releasing of completed trains. The Equipment Management Department manages the inventories of railroad cars. It makes sure the right freight cars are at the right place at the right time. The Treasurer’s Department conducts a variety of services for the company as a whole. The following additional information has been gathered:

   	North		South		West
   Number of scheduled trains	4,400		5,300		8,000
   Number of railroad cars in inventory	1,300		2,100		1,800

   Required:

   1. Prepare quarterly income statements showing income from operations for the three regions. Use three column headings: North, South, and West. Do not round your interim calculations.

   Thomas Railroad Company
   Divisional Income Statements
   For the Quarter Ended December 31
   	North	South	West
   Revenues	$	$	$
   Operating expenses
   Income from operations before service department charges	$	$	$
   Less service department charges:
   Dispatching	$	$	$
   Equipment Management
   Total service department charges	$	$	$
   Income from operations	$	$	$

   2. What is the profit margin of each division? Round to one decimal place.

   Region	Profit Margin
   North Region	%
   South Region	%
   West Region	%

   Identify the most successful region according to the profit margin.
   

   3. What would you include in a recommendation to the CEO for a better method for evaluating the performance of the divisions?

   1. The method used to evaluate the performance of the divisions should be reevaluated.
   2. A better divisional performance measure would be the rate of return on investment (income from operations divided by divisional assets).
   3. A better divisional performance measure would be the residual income (income from operations less a minimal return on divisional assets).
   4. None of these choices would be included.
   5. All of these choices (a, b & c) would be included.

Do you agree that the current situation is as uncertain as it is portrayed in this statement? Why or why not?

This is the reading:

The toll the new coronavirus has taken on an economy that was healthy at the start of March came into clear relief when the government said Thursday that 6.6 million Americans had applied for unemployment benefits the week before.

No one weeps for the corporate bosses behind the decisions to lay off many of those people, but these bosses are struggling as they make the toughest calls of their careers. Marriott International Inc.'s CEO told analysts this surpasses the magnitude of 9/11 and the 2008 financial crisis combined. In a letter to employees , General Electric Co.'s CEO said this is an era where the unknowns outweigh the knowns.

Business leaders live by the calendar, attaching forecasts, projects and goals to a specific date or period of time. No one knows when state-issued mandates to stay at home will lift, and that renders a calendar about as useful in 2020 as an eight-track player. It is like stumbling around in the dark.

As quarterly earnings conference calls take place in the coming weeks, expect to hear a lot of "we don't know," "it's hard to say," and "I wish I had a crystal ball." These terms aren't typical for the managing class.

"CEOs are wired to take action," Jerry Colonna , a former venture capitalist who now counsels top executives, told me this week. "It's really hard when they don't really know what action to take. It's like taking a bucket to extinguish a fire and not knowing if the bucket is full of water or confetti."

Bahram Akradi, the Iranian-born founder of the Life Time Inc. health-club chain , is one of those CEOs looking for water in the bucket. I've talked with Mr. Akradi often in recent weeks about how his company is navigating the crisis.

The answer: It isn't pretty. Revenue has all but dried up, nearly $1 billion in new developments are on ice. "These are the facts," he told me during a Wednesday FaceTime session from his Chanhassen, Minn., office. "Empty parking lots are a fact."

Like many honchos I talk to, Mr. Akradi would like political leaders to set a firm date to reopen businesses and end rigid sheltering rules—even if that date is several weeks in the future. He also wants everyone's bills across the country to be postponed in April. For instance, mortgages or car payments due this month should be deferred to May.

Topping the list of concerns Mr. Akradi can control: the 38,000 people on his payroll. He likens Life Time to a boat in troubled waters. "We are in a big, massive storm," he told employees March 25. "We have no idea how long the storm is, or how bad it's going to get. What I'm trying to do is make sure I keep everybody on this ship staying intact and alive. That's all."

Eight days before, when he closed more than 150 clubs in 30 states, he recorded a video message telling employees Life Time could weather a two-week shutdown without breaking much of a sweat. After that, he'd have to get creative.

Last week came another video in which he had to explain why roughly 36,000, or about 90%, of employees were going on furlough as of Wednesday. The move included a commitment to pay 100% of affected workers' insurance premiums and an extra $10 million for a fund to help employees with essentials that unemployment checks won't cover.

This isn't how he wants it. "They've been with me 28 years, busting their rear ends." Now he's encouraging them to buy only the basics and try, if necessary, to negotiate favorable terms with potential creditors.

Mr. Akradi, 58, cut jobs before , during the financial crisis when a slowdown in discretionary income slammed several industries, including fitness. Even cutting under 200 jobs "felt like death, the ugliest thing I've had to do in my life." How much worse is it this time? "It is not even in the same orbit."

The day after my last chat with Mr. Akradi, I talked by phone with ZipRecruiter Inc. founder and CEO Ian Siegel as he kept an eye on two children at his home in Southern California. Mr. Siegel's had just finished a roller-coaster of a month that included laying off or indefinitely furloughing 500 people, roughly a third of the staff.

"All the way up to March 9 we were in a boom economy, and then literally overnight we were in a recession economy." Job seekers use ZipRecruiter to search and apply for jobs posted by companies on its website. Not all hiring has stopped, but listings rapidly declined starting March 10.

He had to decide whether the abrupt decline was a "shock to the system or the new normal." Without an accurate compass, he decided to plan for the worst-case scenario. "We knew we were going to have to make hard choices fast or harder choices later." He intentionally cut to the bone.

Mr. Siegel, 46, and his management team took about a week to figure out what to do. Keeping 700 employees would be manageable considering the company's liquidity and revenue levels. It likely gives ZipRecruiter enough head count to pivot back to growth if there is a sharp boost in hiring at the end of this crisis.

The process was gut wrenching; "definitely the hardest decision I've had to make." Mr. Siegel informed each displaced employee individually via videoconference, making it clear that each one was considered valuable. He hopes to rehire many of them.

Here's an important thing Mr. Siegel takes away from this process: A red hot startup like the decade-old ZipRecruiter can be sobered at a moment's notice.

"I really thought we were hardened, that we were operationally invulnerable," he said. The steps he took last month were "humbling."

These CEOs believe they will emerge and their businesses will eventually resemble what they looked like a month ago. Mr. Siegel said making necessary cuts now means the enterprise can continue to live another day and Mr. Akradi says CEOs like him are as crafty as they are tenacious.

"I'm never going to be faster than the bear," Mr. Akradi told me. "I just have to be faster than a lot of other folks."

Good advice, but outrunning the other guy just got a lot harder to do.

As a leader facing the COVID-19 pandemic, in which of these two directions would you lean in your strategic messaging and why?

Do you agree that the current situation is as uncertain as it is portrayed in this statement? Why or why not?

This is the reading:

The toll the new coronavirus has taken on an economy that was healthy at the start of March came into clear relief when the government said Thursday that 6.6 million Americans had applied for unemployment benefits the week before.

No one weeps for the corporate bosses behind the decisions to lay off many of those people, but these bosses are struggling as they make the toughest calls of their careers. Marriott International Inc.'s CEO told analysts this surpasses the magnitude of 9/11 and the 2008 financial crisis combined. In a letter to employees , General Electric Co.'s CEO said this is an era where the unknowns outweigh the knowns.

Business leaders live by the calendar, attaching forecasts, projects and goals to a specific date or period of time. No one knows when state-issued mandates to stay at home will lift, and that renders a calendar about as useful in 2020 as an eight-track player. It is like stumbling around in the dark.

As quarterly earnings conference calls take place in the coming weeks, expect to hear a lot of "we don't know," "it's hard to say," and "I wish I had a crystal ball." These terms aren't typical for the managing class.

"CEOs are wired to take action," Jerry Colonna , a former venture capitalist who now counsels top executives, told me this week. "It's really hard when they don't really know what action to take. It's like taking a bucket to extinguish a fire and not knowing if the bucket is full of water or confetti."

Bahram Akradi, the Iranian-born founder of the Life Time Inc. health-club chain , is one of those CEOs looking for water in the bucket. I've talked with Mr. Akradi often in recent weeks about how his company is navigating the crisis.

The answer: It isn't pretty. Revenue has all but dried up, nearly $1 billion in new developments are on ice. "These are the facts," he told me during a Wednesday FaceTime session from his Chanhassen, Minn., office. "Empty parking lots are a fact."

Like many honchos I talk to, Mr. Akradi would like political leaders to set a firm date to reopen businesses and end rigid sheltering rules—even if that date is several weeks in the future. He also wants everyone's bills across the country to be postponed in April. For instance, mortgages or car payments due this month should be deferred to May.

Topping the list of concerns Mr. Akradi can control: the 38,000 people on his payroll. He likens Life Time to a boat in troubled waters. "We are in a big, massive storm," he told employees March 25. "We have no idea how long the storm is, or how bad it's going to get. What I'm trying to do is make sure I keep everybody on this ship staying intact and alive. That's all."

Eight days before, when he closed more than 150 clubs in 30 states, he recorded a video message telling employees Life Time could weather a two-week shutdown without breaking much of a sweat. After that, he'd have to get creative.

Last week came another video in which he had to explain why roughly 36,000, or about 90%, of employees were going on furlough as of Wednesday. The move included a commitment to pay 100% of affected workers' insurance premiums and an extra $10 million for a fund to help employees with essentials that unemployment checks won't cover.

This isn't how he wants it. "They've been with me 28 years, busting their rear ends." Now he's encouraging them to buy only the basics and try, if necessary, to negotiate favorable terms with potential creditors.

Mr. Akradi, 58, cut jobs before , during the financial crisis when a slowdown in discretionary income slammed several industries, including fitness. Even cutting under 200 jobs "felt like death, the ugliest thing I've had to do in my life." How much worse is it this time? "It is not even in the same orbit."

The day after my last chat with Mr. Akradi, I talked by phone with ZipRecruiter Inc. founder and CEO Ian Siegel as he kept an eye on two children at his home in Southern California. Mr. Siegel's had just finished a roller-coaster of a month that included laying off or indefinitely furloughing 500 people, roughly a third of the staff.

"All the way up to March 9 we were in a boom economy, and then literally overnight we were in a recession economy." Job seekers use ZipRecruiter to search and apply for jobs posted by companies on its website. Not all hiring has stopped, but listings rapidly declined starting March 10.

He had to decide whether the abrupt decline was a "shock to the system or the new normal." Without an accurate compass, he decided to plan for the worst-case scenario. "We knew we were going to have to make hard choices fast or harder choices later." He intentionally cut to the bone.

Mr. Siegel, 46, and his management team took about a week to figure out what to do. Keeping 700 employees would be manageable considering the company's liquidity and revenue levels. It likely gives ZipRecruiter enough head count to pivot back to growth if there is a sharp boost in hiring at the end of this crisis.

The process was gut wrenching; "definitely the hardest decision I've had to make." Mr. Siegel informed each displaced employee individually via videoconference, making it clear that each one was considered valuable. He hopes to rehire many of them.

Here's an important thing Mr. Siegel takes away from this process: A red hot startup like the decade-old ZipRecruiter can be sobered at a moment's notice.

"I really thought we were hardened, that we were operationally invulnerable," he said. The steps he took last month were "humbling."

These CEOs believe they will emerge and their businesses will eventually resemble what they looked like a month ago. Mr. Siegel said making necessary cuts now means the enterprise can continue to live another day and Mr. Akradi says CEOs like him are as crafty as they are tenacious.

"I'm never going to be faster than the bear," Mr. Akradi told me. "I just have to be faster than a lot of other folks."

Good advice, but outrunning the other guy just got a lot harder to do.

Which of the following is true?

a. Everything else remaining constant, the present value of a future lump sum payment will increase if the time period declines. b. Everything else equal, you will accrue more interest if you choose to invest using simple interest versus compound interest. c. Everything else held constant, if the number of payments related to an annuity due increase, so will the present value of the annuity. d. All else equal, the future value of an annuity due will be greater than the future value of an ordinary annuity. “a”, “b”, “c” and “d” are correct only “a”, “b” and “c” are correct only “a” and “b” are correct only “b” and “c” are correct only “c” and “d” are correct

S. Bouchard and Company hired you as a consultant to help estimate its cost of capital. You have obtained the following data: D ₀ = $0.85; P ₀ = $22.00; and g = 6.00% (constant). The CEO thinks, however, that the stock price is temporarily depressed, and that it will soon rise to $37.00. Based on the DCF approach, by how much would the cost of equity from retained earnings change if the stock price changes as the CEO expects? Do not round your intermediate calculations.

Correspondence Assignment

From your college years, you have hands-on experience with a wide range of social media tools, having used them to collaborate on school projects, to become involved in your local community, to learn more about various industries and professions, to research potential employers during your job search, and to stay in touch with family and friends at home. In fact, without social media, you might've never heard about your current employer in the first place. Moreover, your use of social media on the job has already paid several important dividends, including finding potential sales contacts at several large companies (which you referred to the sales department), connecting with peers in other companies to share ideas for working more efficiently, and learning about some upcoming legislative matters in your state that could hamper your company's current way of doing business.

You hoped that by setting an example through your own use of social media at work, your new colleagues and company management would quickly adopt these tools as well. However, just the opposite has happened. Waiting in your e-mail inbox this morning was a message from CEO Nicholas Meyer announcing that the company is now cutting off access to social networking websites and banning the use of any social media at work for all employeesexcept employees in the sales, marketing, and public relations departments. The sales, marketing, and public relations departments retain access to all social media tools in the new policy. The message says that for other employees using company time and company computers for socializing is highly inappropriate and might be considered grounds for dismissal in the future.

Your task: You fight the urge to fire off a hotly worded reply to the CEO about how social media is used by other departments to support the company's success. Instead, you decide to send an email to your immediate superior Anna Abrams that explains why you believe the new policy should be reversed. Using your supervisor's favorite medium, write an email explaining why Facebook, Twitter, and other social networking technologies are valid and valuable business tools and ask for action within your reader's scope of power.

Note, this situation or scenario is the most complex of the ones you have completed this semester. Notice that you're writing to an immediate supervisor about a policy that someone at an even higher level (the CEO) wrote. For this situation, take time to consider the power levels of everyone involved. In particular, consider carefully what action you should ask for (and how) and what kind of information your primary (and secondary) reader(s) would need to be persuaded to act. Consider, too, how your primary reader might use your message.

College students Suppose a recent study of 1,000 college students in the U.S. found that 8% of them do not use Facebook. Which of the following describes the population for this example?

-All College students in the US

-The 1000 college students who participated in the study

-all college students in the US who do not use facebook

-The 8% of college students who do not use facebook

Which of the following defines what is meant by a control group in an experiment

-A group that is handled identically to the treatment groups in all respects except that they are controlled to greater extend than the other groups, providing baseline data.

-a group that is used by researchers to monitor how the experiment is going

-a group that is handled identically to the treatment group in all respects except that they dont recieve the active treatment

-none of the above

Which of the following studies can result in researchers extending the results inappropriately because the sample doesn’t represent the intended population?

-Studies involving randomly selected participants

-studies involving convenience samples

-experimental studies

-all of the above

Without random assignment, which of the following can happen?

-naturally occuring confounding variables can result in an apparent relationship between the explanatory and response variables

-the results may not be able to extend to a larger population

-Many people in the study will drop out because they aren’t happy with the treatment they were assigned to. This will cause bias in the results

-none of the above

Making a Type I error is only possible if the ____ hypothesis is true.

-alternative

-null

-power

-none of above

The National Collegiate Athletic Association (NCAA) requires colleges to report the graduation rates of their athletes. Here are data from a Big Ten university's report: 45 of the 74 athletes admitted in a speci fic year graduated within 6 years. Does the proportion of athletes who graduate di ffer significantly from the all-university proportion, which is .70 ?

What is the sample size

-45

-74

-119

-0.029

What is the sample proportion?

-6

-0.61

-6

-65

What are the null and alternative hypotheses?

-Null: p>0.70; alternative: p <0.61

-Null: p=.61; alternative: p <.0..61

-Null: p=0.70; alternative: p is not 0.70

-Null: p=.70; alternative: p > .70

What is the value of the test statistic for your observed results?

-1.70

- (-)2.70

- (-) 1.70

-0.53

What is the p-value for your observed results?

-0.9554

-0.0892

-0.002

-0.998

What is your conclusion? Please use words that a non-statistics student would understand, and justify your answer. Assume a significance level of .05.

-Since the p-value (.9554) > .05, do not reject the null hypothesis. This means that the sample evidence is not strong enough to conclude that the proportion of athletes who graduate di ffer signi ficantly from the all-university proportion of 0.70

-Since the p-value (.0892) > .05, we failed to reject the null hypothesis. This means that the sample evidence is not strong enough to conclude that the proportion of athletes who graduate di ffer signi ficantly from the all-university proportion of 0.70

-Since the p-value (.998) > .05, reject the null hypothesis. This means that the sample evidence is not strong enough to conclude that the proportion of athletes who graduate di ffer signi ficantly from the all-university proportion of 0.70

-since the p-value (.002) < .05, reject the null hypothesis. This means that the sample evidence is strong enough to conclude that a larger proportion of peopleown bread machine than 3 years ago.

Based on your conclusion, what type of error are you risk at?

-type I error

-type II error

-type I and type II error

-none of the above

If the power of the test is 87% for this test, what is the probability of the test making type II error?

-larger than 87%

-13%

-87%

-not enough information

What is the 95% of confidence interval of proportion of athletes graduate within 6 years ?

-(0.302,0.398)

-(1.10.1.32)

-(0.496, 0.724)

Base on your result of 95% confidence interval, can you conclude that majority of the athletes graduate within 6 years?

-No, because 0.50 is in the interval.

-No, because 0.70 is in the interval

-Yes, because 0.40 is not in the interval.

World no.1 Rafael Nadal is to succeed football icons David Beckham and Cristiano Ronaldo as the male face of Emporio Armani Underwear and Armani jeans.

The 24 year-old Spaniard is now building a massive portfolio of endorsement deals with concerns such as Richard Mille watches, Mapfe SA (Spain’s largest insurance company), Kia Motors, Lanvin fragrances and of course Nike Inc. and Babolat.

Even the most conservative estimates maintain that Nadal’s commercial appeal will boost his annual earnings to somewhere comfortably in excess of $US 40 million a year. With three major titles to his credit in 2010 he has collected $10,171,998 in prize money alone.

Simon Chadwick, a professor of sports business strategy and marketing at the Coventry University Business School in England, confidently predicted: “Nadal will even transcend the Federer brand.”

Nadal’s first campaign shots for Armani will not be released until in the New Year and the decision to switch sporting focus for its’ underwear brand from football to tennis is seen as a bold move in a sector of male fashion that is worth more close to $US 10 billion a year.

Armani’s campaign involving Real Madrid and Portugal star Ronaldo was deemed a success across global markets. Other fashion companies including Milanese rivals Dolce and Gabbana recruited the entire Italian World Cup squad.

The only tennis player to previously make a global impact on the underwear market was Bjorn Borg who started his own brand in Sweden that became a worldwide concern. Patrick Rafter is the current image of Bonds underwear in Australia.

Interestingly, no one at Armani seems to realize the irony of signing Nadal who is notorious for taking time between points for readjustment because he habitually seems to struggle with the fit of his underwear.

1. Discuss the link between a brand image and pricing strategy.

2. Discuss the advantages and disadvantages of using social networks as part of a promotional campaign.

3. Discuss the advantages and disadvantages of celebrity endorsement in the promotion of fashion brands.

World no.1 Rafael Nadal is to succeed football icons David Beckham and Cristiano Ronaldo as the male face of Emporio Armani Underwear and Armani jeans.

The 24 year-old Spaniard is now building a massive portfolio of endorsement deals with concerns such as Richard Mille watches, Mapfe SA (Spain’s largest insurance company), Kia Motors, Lanvin fragrances and of course Nike Inc. and Babolat.

Even the most conservative estimates maintain that Nadal’s commercial appeal will boost his annual earnings to somewhere comfortably in excess of $US 40 million a year. With three major titles to his credit in 2010 he has collected $10,171,998 in prize money alone.

Simon Chadwick, a professor of sports business strategy and marketing at the Coventry University Business School in England, confidently predicted: “Nadal will even transcend the Federer brand.”

Nadal’s first campaign shots for Armani will not be released until in the New Year and the decision to switch sporting focus for its’ underwear brand from football to tennis is seen as a bold move in a sector of male fashion that is worth more close to $US 10 billion a year.

Armani’s campaign involving Real Madrid and Portugal star Ronaldo was deemed a success across global markets. Other fashion companies including Milanese rivals Dolce and Gabbana recruited the entire Italian World Cup squad.

The only tennis player to previously make a global impact on the underwear market was Bjorn Borg who started his own brand in Sweden that became a worldwide concern. Patrick Rafter is the current image of Bonds underwear in Australia.

Interestingly, no one at Armani seems to realize the irony of signing Nadal who is notorious for taking time between points for readjustment because he habitually seems to struggle with the fit of his underwear.

1. Discuss the link between a brand image and pricing strategy.
2. Discuss the advantages and disadvantages of using social networks as part of a promotional campaign.
3. Discuss the advantages and disadvantages of celebrity endorsement in the promotion of fashion brands.